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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. AVC = TVC/Q






2. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






3. A good for which higher income increases demand






4. Product demand - productivity - prices of other resources - and complementary resources






5. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






6. Ei = (%dQd good X)/(%d Income)






7. Ed < 1






8. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






9. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






10. The sum of consumer surplus and producer surplus






11. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






12. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






13. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






14. TR = P * Qd






15. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






16. The ability to set the price above the perfectly competitive level






17. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






18. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






19. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






20. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






21. Es = (%dQs) / (%dPrice)






22. Ed = 1






23. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






24. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






25. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






26. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






27. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






28. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






29. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






30. The imbalance between limited productive resources and unlimited human wants






31. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






32. The difference between total revenue and total explicit and implicit costs






33. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






34. The additional benefit received from the consumption of the next unit of a good or service






35. Occurs when LRAC is constant over a variety of plant sizes






36. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






37. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






38. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






39. The additional cost incurred from the consumption of the next unit of a good or a service






40. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






41. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






42. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






43. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






44. The practice of selling essentially the same good to different groups of consumers at different prices






45. Costs that change with the level of output. If output is zero - so are TVCs.






46. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






47. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






48. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






49. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






50. Two goods are consumer substitutes if they provide essentially the same utility to consumers